Another new rail franchise starts today. GNER, which used to be owned by Sea Containers with National Express, has ditched the brand and will now call itself, with great show of imagination, National Express East Coast. GNER had to throw the towel in last year because it had been overoptimistic about passenger numbers, but oddly National Express has set itself even more onerous targets over the next seven years.

It's been a real merry-go-round over the past few weeks, with the departure of the likes of Virgin Cross Country, Midland Mainline, Silverlink and Central, and the arrival of new operators such as East Midlands and Arriva Cross Country. That means lots of money for the makers of those plastic decals that can now be used to adopt a new livery almost overnight (in fact, bizarrely parts of the old GNER livery were being ripped off at King's Cross last week during the normal turnaround of the services).

Actually, the franchisees are not really new but mostly the same old faces in new guises. So Stagecoach, which runs South West Trains, has added East Midlands to its portfolio - essentially the domestic services out of St Pancras - while Arriva, which already runs train services in Wales and used to run various other franchises, has now taken over Cross Country services, the long distance routes that do not go to or from London. The only genuine new entrant is the franchisee for the London Overground, the Hong Kong metro company MTR, which is a very different type of financial arrangement - it is more of a management contract with Transport for London setting and collecting the fares and making all the decisions about investment. It is, in effect, almost a renationalisation of that franchise, but whisper it not to ministers, as the N-word is forbidden in the Department for Transport.

Indeed, the traditional method of franchising out the national rail network is a very strange arrangement whose purpose, beyond the fact that the government has no desire to see the recreation of British Rail, is a mystery. The bidders for franchises are given the right to run a group of rail routes, usually for a period of seven years. In recent franchise competitions, it has been made very clear that optimistic bids are expected and therefore the successful bidders are expecting to grow revenue at around 6-8% per year. Fine while we have an economic boom, but clearly impossible in a recession.

Because of the strange way that railway finances are conducted, many of the franchisees are now paying premiums to the government. While that looks good on paper, the truth is that because the government pays a £2bn grant direct to Network Rail, all but the Gatwick Express franchise are still loss-making if the accounting is done properly.

And that's the nub really. Back in 1996 when the first franchises were being let, I wrote that it was a crazy money-go-round that seemed to serve no purpose other than to obscure the economics of the industry and give private companies the opportunity to make money simply on the basis of guessing how many passengers they would attract in the ensuing seven to 10 years. And, of course, when things go wrong, the franchisees can simply give up, as GNER did.

That is still true today. No one in government has elaborated why we have a franchising system. In truth, the only explanation is that they do not want to run a big nationalised industry with in-house labour and all the potential union problems, but you won't get a minister owning up to that. Nor will you get one to admit the industry has been effectively renationalised (that N-word again). With Network Rail essentially state-owned and the Department for Transport managing the details of the franchises, the industry is more controlled by government than in the days of British Rail - it's just that the strings are less visible.

All these changes are bad for staff morale and for performance. GNER used to be a good operator but has now become the worst of the InterCity companies as morale has plummeted with all the uncertainty. And we may get a lot more of this. This whole house of cards could fall apart very swiftly if there were a recession. The railway industry has enjoyed fantastic growth, with around a 50% rise in patronage in the past decade. The franchise bids are based on a continuation of that trend. If there is a reversal, watch for lots of franchisees suddenly deciding that it is not worth the candle. It will be very interesting for commentators like me, but rather less so for the poor passengers who will be faced with uncertainty and dissatisfied staff.